The retailed gasoline price in China: Time-series analysis and future trend projection

Abstract This study introduces a method to systematically project retailed gasoline prices in China and provides projection results. Based on oil taxation and pricing mechanisms in China, this study establishes the statistical relationship between the retailed gasoline prices in China and international crude oil prices using error correction models (ECM), time-series models. Detailed comparison among asymmetric ECM, threshold ECM, and threshold asymmetric ECM are provided. By adopting the ECMs, the study projects the retailed gasoline prices from 2019 to 2050 based on the international crude oil prices from the Annual Energy Outlook provided by the U.S. Energy Information Administration. The results show that the asymmetric responsiveness and the threshold effect exist under current Chinese oil pricing policy with a lag of one month or even shorter in gasoline price adjustment. Moreover, the analysis informs one that, in the short-run, the retailed gasoline prices in China are more sensitive to international crude oil price increases; while in the long-run, the retailed gasoline prices are more sensitive to international crude oil price decreases. Compared with the national average gasoline price in China of 6.04 CNY/Liter in 2017, the national average gasoline price in China is projected to be about 7.64 CNY/Liter (2017 dollar) by 2050.

[1]  Perry Sadorsky,et al.  Modeling and forecasting petroleum futures volatility , 2006 .

[2]  Wina Crijns-Graus,et al.  A comparison of oil supply risks in EU, US, Japan, China and India under different climate scenarios , 2016 .

[3]  Perry Sadorsky,et al.  Time-varying risk premiums in petroleum futures prices , 2002 .

[4]  R. Engle.  Autoregressive conditional heteroscedasticity with estimates of the variance of United Kingdom inflation , 1982 .

[5]  Suzanna Long,et al.  Barriers to widespread adoption of electric vehicles: An analysis of consumer attitudes and perceptions , 2012 .

[6]  James D. Hamilton,et al.  Understanding Crude Oil Prices , 2008 .

[7]  Zhenhong Lin,et al.  The dual-credit policy: Quantifying the policy impact on plug-in electric vehicle sales and industry profits in China , 2018, Energy Policy.

[8]  Zhujun Jiang,et al.  Estimating the Efficiency and Impacts of Petroleum Product Pricing Reforms in China , 2018 .

[9]  Krishna H. Koirala,et al.  Energy prices and agricultural commodity prices: Testing correlation using copulas method , 2015 .

[10]  Lixin Tian,et al.  A novel approach for oil price forecasting based on data fluctuation network , 2018 .

[11]  Matteo Manera,et al.  Asymmetric Error Correction Models for the Oil-Gasoline Price Relationship , 2005 .

[12]  James G. MacKinnon,et al.  Numerical Distribution Functions for Unit Root and Cointegration Tests , 1996 .

[13]  J. M. Griffin,et al.  New Evidence on Asymmetric Gasoline Price Responses , 2003, Review of Economics and Statistics.

[14]  Brendan McCabe,et al.  Can Economic Time Series Be Differenced to Stationarity , 1996 .

[15]  B. Reilly,et al.  Petrol Price Asymmetries Revisited , 1996 .

[16]  Yi-Ming Wei,et al.  Carbon emissions quotas in the Chinese road transport sector: A carbon trading perspective , 2017 .

[17]  Evaluation of House Price Models Using an ECM Approach: The Case of the Netherlands , 2009 .

[18]  Offer Lieberman,et al.  A characterization of the price behavior of international dual stocks: an error correction approach , 1999 .

[19]  Elspeth Thomson,et al.  The Demand for Gasoline in China: A Cointegration Analysis , 2004 .

[20]  S. Borenstein,et al.  Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes , 1997 .

[21]  Jacob Cohen,et al.  Applied multiple regression/correlation analysis for the behavioral sciences , 1979 .

[22]  K. Lai,et al.  Green Transportation and Energy Consumption in China , 2017 .

[23]  Xu Gong,et al.  Time-varying effects of oil supply and demand shocks on China's macro-economy , 2018 .

[24]  C. Granger,et al.  Co-integration and error correction: representation, estimation and testing , 1987 .

[25]  Otto C. Doering,et al.  The economic competitiveness and emissions of battery electric vehicles in China , 2015 .

[26]  A. Piquero,et al.  USING THE CORRECT STATISTICAL TEST FOR THE EQUALITY OF REGRESSION COEFFICIENTS , 1998 .

[27]  Zhenhong Lin,et al.  A Study of China s Explosive Growth in the Plug-in Electric Vehicle Market , 2017 .

[28]  P. Leiby,et al.  Impacts of oil price shocks on the United States economy: A meta-analysis of the oil price elasticity of GDP for net oil-importing economies , 2018 .

[29]  K. Lai,et al.  A threshold cointegration analysis of asymmetric price transmission from crude oil to gasoline prices , 2005 .

[30]  Brian C. Prest.  Explanations for the 2014 oil price decline: Supply or demand? , 2018, Energy Economics.